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Wedbush raised Microsoft’s PT to $500 from $475, while maintaining its rating at outperform.
Wedbush analysts said they were “incrementally bullish” on Microsoft’s monetization of its AI-driven Copilot product, and that the brokerage saw an acceleration in AI adoption among Microsoft customers and industry heads.
Copilot was an AI-powered chatbot launched by Microsoft in 2023, and was eventually integrated as an assistant into the Windows operating system, as well as Microsoft’s entire suite of corporate software products.
“We strongly view this as Microsoft’s ‘iPhone Moment’ with AI set to change the cloud growth trajectory in Redmond the next few years and our recent checks giving further confidence in this dynamic,” Wedbush analysts wrote in a note on Monday.
Wedbush forecast that over 70% of Microsoft’s installed base will adopt its AI functions over the next three years. The brokerage also expects AI offerings to add “another $25 billion-$30 billion to Microsoft’s top-line by 2025.
Microsoft leaned hard into the AI boom over the past year, leveraging its investment and partnership with ChatGPT creatpr OpenAI to incorporate AI across its suite of products. This paid off for the Redmond-based giant, which beat earnings estimates for all four quarters of 2023.
The AI boom also saw Microsoft overtake Apple Inc (NASDAQ:AAPL) to become the most valuable listed firm on Wall Street. Microsoft’s stock is up about 14% so far in 2024, outperforming a 10% rise in the S&P 500 index.
Still, Wedbush flagged some risks for Microsoft. The brokerage said increasing competition, pricing, shifts in technology and macroeconomic headwinds could prevent the attainment of its price target and rating.
